Italy coalition shocks Europe with draft plans

Everyone is talking about it in Brussels. Even if Italy’s 5 Star Movement and The League have insisted that the document is a draft and has since been changed, the fact that some of the proposals contained in a leaked coalition agreement were even considered has worried Europhiles.

We can only hope for … compromise and a Europeanization of eurosceptic forces”

Mario Telo
Institute of European Studies

Among the points resumed in 39 pages and published by the Huffington Post, are provisions that would shake the entire European project.

According to the document, a League/5 star government would like to create an opt-out mechanism to leave the eurozone if sanctioned by a referendum.

While such a move would threaten enormous disruption, it might even find support among some other countries, according to Mario Telo, a professor at the European Institute for European studies.

“At the moment [German Chancellor Angela] Merkel and [French president Emmanuel] Macron are facing opposition by Northern countries such as The Netherlands and Finland, who don’t want a reform of the eurozone in favour of southern European countries. The paradox is that the outcome of the conflict between Italy and European Institutions would serve the goal of those Nordic countries, which is creating a smaller eurozone for A-league members and leaving the Mediterranean states out”.

The draft contract also calls for a rewriting of EU treaties and changes to fiscal policies such as the Stability and Growth Pact which restricts countries’ borrowing and spending. According to the two leaders’ initial verdict, it is ”stringent, unfounded and unsustainable from an economic and social point of view”.

A reconsideration of the Italian contribution to the next EU budget and a request to the European Central Bank to freeze €250bn of Italian debt were also on the table.

For context, Italy has the second-highest debt load in the eurozone, after Greece.

On top of that 5 Star and League back a minimum income for job-seekers, flat income tax and the abolition of recent pension reform.

“Such arrangements imply more deficit spending and less income from taxation, which would cost about 100 billion euro. We would have a dramatic problem: the conflict between Italy and the EU institutions is extremely relevant because it is the third economy of the eurozone and a founding member of the EU. We can only hope for a domestic balance checking that would lead to a compromise and to a Europeanization of eurosceptic forces”, Telo says.

Brussels is closely watching what is going on in Italy but prefers to avoid comment. However, this seems impossible given the current situation. On Tuesday Valdis Dombrovskis, European Commissioner for financial stability warned Italy to reduce its debt and deficit while expressing optimism about recent developments in the country. The same day, Jyrki Katainen, EU jobs and growth commissioner said he believes that Italy will continue to respect its commitments. “The rules of the Stability Pact apply to all member states and the Commission will grant no exceptions to anyone,” she noted.

Dimitris Avramopoulos, EU Migration Commissioner, yesterday stressed the importance of Italy managing the migrant crisis in Europe and said that he is sure the country will stick to its engagements.__EuroNews